It will be up to Ireland to decide whether to request a precautionary credit line to help its exit from the programme, ECB’s executive board member Jorg Asmussen said on Monday, pointing that there were pending risks, specifically in the banking sector and in terms of its deficit, still “very high” compared to the EU’s average.
Last week in Washington ECB’s president Mario Draghi also praised Ireland’s efforts to repair its public finances and banking sector saying they had performed “really well all throughout this dramatic period.”
But the question of whether the country will pass on a precautionary credit line to exit the three-year programme at the end of the year is still on the air. Draghi refused to comment on that issue. Irish finance minister as well as EU Economic and Monetary Affairs Commissioner Olli Rehn have said the country may exit its bailout without one.
Refusing to take it would indeed reduce the conditions and close monitoring from the EU and be a good argument for the government to sell to their voters. However, it would block Ireland from accessing the ECB (still unused) Outright Monetary Transactions (OMT) program of government bond purchases.
Ireland has been through structural reforms to reduce financial risk and indeed its borrowing costs have steadily fallen since a peak in 2011. The Emerald Isle will comfortably beat EU deficit targets next year: 4.8 percent next year from 7.3 percent in 2013. The economy will grow 0.2 percent this year before bouncing back to growth of 1.8 percent in 2014, according to the government. As for banks, they have dramatically reduced their reliance on cheap ECB funding over the past two years, cutting their borrowings from Frankfurt by 44 per cent to €34 billion in the year to July.
“Economic recovery has started. However, the pace of that recovery, which remains partly within our control, will largely be set by growth rates achieved by the world’s major developed economies,” the Irish Times said in its Monday op-ed.